Can a deceased bank account attract charges and penalties?

According to Nedbank’s Deceased Accounts Division, the estate of a deceased person is charged fees and penalties, and will also earn interest if the account is in credit, until the bank has received notification of the death.

The Executor of the Estate, or a person who has Power of Attorney, must supply written instructions to freeze the account. Formal notification includes a written instruction informing the bank of the death and requesting that the account is frozen.

The death certificate must also be supplied with the formal notification.

The Executor must also liaise with third parties who operate debit orders on the account and formally inform them of the death and provide the necessary proof. Otherwise debit orders and stop orders will continue to go through.

If there isn’t enough funds to meet the debit orders, penalties will be imposed until the account is frozen. The estate is liable to pay outstanding fees.

If someone dies without leaving a valid will, the estate will devolve in terms of the rules of intestate succession, as stipulated in the provisions of the Intestate Succession Act, (Act 81 of 1987) and the descendant/s who inherit the intestate estate will be responsible for the bank charges which were acquired prior to the formal notification being supplied to the bank.

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I’m nearing 40 and I’m not sure if I’ve invested wisely. How can I tell?

I’m nearing 40 and I’m not sure if I’ve invested wisely. How can I tell?

By the time people hit their 40s, three out of four people have saved something towards their retirement. They are hitting their peak earning years and they should be well on their way to reaching their long term savings goals.

Except that life gets in the way. A dilemma faced by those in their 40s is that they typically need to save for university tuition for their children, whilst also saving towards their retirement and perhaps even building a house as well.

Your 40s may seem like the ideal time to switch into overdrive but many 40 somethings are instead puttering along in first gear. They save what they can, do their best and figure that they’ll sort out their finances later, but not having a financial plan is actually the same as having a really bad plan.

Every financial plan should be specific to the individual’s needs and lifestyle requirements. You should look at your net income and set priorities for paying off debt and saving for your different needs.

Consider investing into a retirement annuity to maximise on reducing your taxable income.

Do an insurance needs analysis for your family. For a healthy person in their 40s the cost of your life cover is not exorbitant.

Check out your disability cover – a lot of companies will only pay up to 75% of your gross monthly income.

Consider your household and car insurance needs.

As a general rule of thumb if you started saving in your 20s you can get away with saving approximately 12% of your take home pay. If you are in your 40s the general rule of thumb is that you need to increase your savings rate to about 20% of your net income.

It seems that too few people have taken the necessary steps to prepare themselves to be financially secure in retirement but it is important to realise that it is never too late to start.

The principles of investment planning—starting early, having a long-term plan and investing regularly are the same for men and women. So, why do women have special investment needs?

If you look at the life patterns of women, you’ll see that:

Women tend to live longer than men

Their careers are interrupted by family needs

More often than not, women prefer a conservative investment strategy.

Given inflation and the many responsibilities they have taken on, as well as the high aspirations they have, there is a compelling need for women to take charge of their financial planning.

Your financial picture

The three most important aspects of your personal financial picture are:

Your risk tolerance

Your time frame

Your personal circumstances

What is your risk tolerance?

Your ‘risk tolerance’ is basically your comfort with an investment option. The risk spectrum ranges from ‘safe’, with little risk of loss or volatility (like a money market fund), to very ‘risky’, volatile investments (some equity funds or sector funds).

You need to determine your own comfort zone. For example, if you don’t like to be awake all night wondering about your investment, you can invest in moderate risk funds managed by professional fund managers.

Also, you need to keep in mind inflation and taxes. With the so-called safe but low return investments, you can actually end up worse-off when these two are taken into account.

Your time frame

When we talk about an investment’s time frame, we mean the time between when you make the initial investment and when you’ll need the money.

If you start an investment with the goal of paying university tuition for a two-year-old child, you’ll need the money starting in about 16 years. If that child is 15, you’ll need the money starting in about three years.

Every investment has its own time frame depending on your goal and life stage. And the time frame can change as the goal approaches.

Knowing where you are in life stage will determine what type of investment strategy you should use.

Your Net Worth

At a minimum, your financial picture should show you how your assets stack up against your liabilities. In other words, if you had to pay off everything you owe right now, how much would be left over?

Your assets. Make a list of everything you own that has monetary value. Beside each item, write what it’s worth in cash. The list should include investment assets like stocks, bonds, CDs and mutual funds. It should also include property such as your home or other real estate, vehicles, jewelry, art and antiques. Add the amounts in the list to determine the total value of your assets.

Your liabilities. A list of liabilities will include all your debts and the amount owed for each one. The bond on a home is the largest liability for many people. Other debts include credit card balances, unpaid bills and car loans. When the list is complete, add those numbers to get a rand amount for your total liabilities.

Your net worth. Subtract your liabilities from your assets and the resulting amount is your net worth. Ideally, your net worth will be a positive number, but it’s possible to have a negative net worth if liabilities exceed assets. This figure is the basis for your financial picture and will help you determine how much you need to invest to meet your financial goals.

How much am I worth?

Do a proper review of your assets and liabilities, which will help you in arriving at your financial worth (or net worth).

This strategy can work because different categories behave differently. Stocks, for instance, offer potential for both growth and income, while bonds typically offer stability and income. The benefits of different categories can be combined into a portfolio with a level of risk you find acceptable.

What allocation is right for you?

Asset allocation helps investors balance the returns they want with an acceptable level of risk. Your asset allocation should be based on your investment goals, time frame, and risk tolerance.

In retirement, you might want to emphasize bonds and cash for income and stability. But don’t overlook stocks, because you need to keep up with inflation.

If you won’t need your money for 25 years, a financial advisor might recommend an asset allocation of 100% stocks. That wouldn’t mean investing in only one stock. You’d still want your portfolio to be diversified across a variety of stocks.

Preparing for emergencies

When considering your asset mix, don’t forget to set aside money for emergencies. Life is full of situations such as serious illness, job loss, and divorce for which it’s hard to plan. So, it’s wise to put aside cash reserves for the unexpected. Aim to build an emergency reserve which can sustain you for three to six months.

Help with selecting your asset mix

Before investing, one needs to understand the various investment options thoroughly. If you think you do not have time or expertise to manage your money, leave it to professional fund managers like mutual funds.

At what age should I start planning for my financial future?

I’m a teenager, is it too early for me to start planning for my financial future?

There are a number of reasons why teenagers should start taking control of their financial future, firstly, it does not matter whether you are working with the best financial planner in the galaxy, at the end of the day nobody looks after your money better than you do.

Working with a good financial planner can add a lot of value but becoming financially successful starts with you.

Start saving as soon as possible

According to Prof Aubrey de Grey, if you are under the age of 50 now, you could live to be 1 000 years old.

Consider the fact that by achieving just a 1% higher rate of return on your investments over forty years compared to your neighbour, you can increase your income by as much as eight additional years in retirement.

It is thus essential that young people start saving as early as possible and become financially fit at a much younger age because goodness knows, they are going to need it.

Educate yourself

Teenagers can engage in a number of activities to increase their financial knowledge. There are personal finance journals which they can subscribe to and most Saturday newspapers carry a personal finance section. Reading the business section of newspapers and financial magazines provide for a macro overview of the economy and how it affects the consumer and business.

There are financial planning and investment clubs that individuals can engage in or they can start their own club. A plethora of personal finance books are available in the market and one need only Google the top 10 rated personal finance books to come up with some beneficial literature to read.

Your relationship with money

Increasing one’s knowledge is however just the start to becoming financially successful. One of the biggest challenges for any individual to overcome in relation to money, no matter their age is more to do with psychology than financial knowledge.

The ability to control one’s emotions when making financial decisions will add more to your bottom line than anything you will ever read.

In the world of money and finance there is no shortage of information, the challenge is filtering out the garbage, retaining information that will add value and developing a dogged determination not to let emotions such as greed and fear control your financial decisions.